Tax Policy Holding Canadian Solar Back

Despite claims from the government, the Canadian solar energy is being stifled by a poorly written tax code, according to its main trade association, CanSIA. A new report from the organization calls for changes in the code that could have widespread and immediate positive impacts for more solar development.

The organization released its report entitled Expanding Class 43.1 to Include Solar. Class 43.1 is a tax measure which allows for the accelerated write-off of renewable energy products for business applications. It allows the effective cost of these products to be significantly reduced for the business owner. The 2005 federal budget announced changes to increase the write off rate from 30 percent to 50 percent. Technologies that are included in the class for accelerated write off include wind, small hydro, geo-thermal, fuel cells, bio-gas, cogeneration systems, district heating and solar. According to CanSIA, however, solar is the only renewable energy technology that has extensive restrictions placed on its use. These restrictions eliminate over 90 percent of the industrial applications for solar that the act is designed to support. Currently only 1 percent of PV applications, 2 percent of solar hot water applications, and 9 percent of solar air heating applications are covered. CanSIA cites a couple reasons why changes need to be made to Class 43.1 First, a wind system that produces electricity that heats water qualifies – a solar system to heat water does not. Secondly, a solar system that heats water at a coin Laundromat qualifies while a hotel or hospital laundry does not. The Canadian government is promoting Class 43.1 and the changes proposed in the 2005 budget as major support mechanisms for all renewable energy technologies. However the class is structured in a way that does not assist the solar industry significantly nor do the proposed changes rectify this situation. CanSIA, in its Sunny Days Ahead Solar Plan for Canada strategy has made changes in Class 43.1 one of its key recommendations to the federal government. They specifically call for size restrictions for PV systems to be removed along with restrictions on applications for solar thermal systems. “Class 43.1 could have a tremendous impact on sales of solar in Canada – yet currently it cannot be used by the solar industry despite the public claims of government,” said Rob McMonagle, Executive Director of CanSIA. “The changes needed are simple and the changes would provide a signal to the solar industry that the government is serious in it support of solar technologies in Canada.” CanSIA members met separately with government officials from Natural Resources Canada and Finance Canada in March this year to discuss the needed changes. However CanSIA has yet to receive any positive signals from government on the possibility of having the changes implemented.
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